34 F. 368 | U.S. Cir. Ct. | 1888
On November 2,1878, William H. Gest, a citizen of Illinois, brought this suit against William XI. Packwood, T. J. Carter, L. F. Grover, William S. Ladd and W. J. Leatherwood, to have a certain mortgage on the Eldorado ditch, in Baker county, Oregon, owned by Grover, and two judgments against T. J. Carter in favor of Ladd and Leatherwood, respectively, declared of no effect so far as the plaintiff and said ditch are concerned, and to compel said Packwood and Carter to convey the latter to the plaintiff and account for the rents and profits thereof since May, 1874. It appears from the bill that, on February 15, 1873, the defendants Packwood and Carter purchased the ditch at a sale on execution to enforce several judgments theretofore obtained by Pack-wood and 0. M. Carter, the latter having assigued the same to I’. J. Carter, against the Malheur a,nd Burnt River Consolidated Ditch and Mining Company, the then owner of said ditch. On May 28, 1873, Packwood and Carter assigned the sheriff’s certificates of such sale to Arthur T. Rico, the latter agreeing to give his notes therefor to the amount of $29,-700, payable partly to Packwood anti partly to Carter, at various dates, the last one falling due on March 1, 1874, which notes were lo bo indorsed by Clarke, Layton & Co., and in the event of tbeir non-payment, Rico was to reconvey the ditch to Packwood and Carter as security for such payment. The notes tvore made, indorsed, and delivered, and Rice went into the possession of the ditch, and so continued until May 4, 1874, during which time he ojjorated the same and expended thereon in permanent improvements the sum of $15,000, and paid a large portion of said notes. In July, 1873, no redemption having been made, Pack-wood and Carter secretly obtained tlie sheriff’s deed to the ditch for the purpose, as it is alleged, of executing the mortgage now held by the defendant Grover, to C. M. Carter, in fraud of the rights of Rice. On May 4, 1874, Riee and Clarke, Layton & Co., and Packwood and Garter made what is called an agreement of lease, reciting therein the agreement of May, 1873, and that all the notes given on the purchase of the ditch were not paid, whereby Rice leased the ditch and certain other mining property which he had acquired in the meantime to Packwood and Carter for one year, and from year to year thereafter until certain indebtedness, including the unpaid notes of May, 1873, were paid, according to certain specified priorities, out of the not proceeds of the sales of water and the working and sales of mining claims, which proceeds were to be paid by Packwood and Carter, monthly, as rent for the property, to J.
The origin or nature of the right or title of any of these parties to (his water, ditch, and mining ground is not stated or mentioned in the bill or plea. In the absence of anything to the contrary, it may bo assumed that the water was appropriated and conducted by means of the ditch between the termini thereof, in accordance with the custom of the district, the law of the state. 2 Laws Or., e. 60, “Mines;” Rev. St. §§ 2339, 2340. By section 3833 (section 1, act 1870) and section 3834 (section 2, act 1864) of said laws, ditches for mining purposes are declared real property, and “the laws relative to the sale and transfer of real estate” are made applicable thereto. Whether this includes the registration of deeds or conveyances of such ditches may be a question; but. as the efiect or operation thereof depends to some extent on registration probably it does. But even then neither the contract of 1873 nor that of 1874, al
But the principal points made in the argument against this plea are (l)'that neither the mortgagee, C. M. Carter, nor his assignee, L. F. Grover, appear thereby to be purchasers for a valuable consideration; and (2) that C. M. Carter, having taken a* quitclaim deed from T. J. Carter, is not a bona fide purchaser without notice. In May v. Le Claire, 11 Wall. 232, it is held that a pdrehaser under a quitclaim deed is not a bona fide purchaser within the rule which protects such a purchaser from the operation of a prior conveyance or sale of which he had no notice. Notice sufficient to prevent the purchase from being bona fide is said to inhere in the very form of this kind of a conveyance. 2 Pom. Eq. Jur. § 753. In such case the purchaser only takes whatever the grantor could lawfully convey, — what there is left in him. To the same effect is the ruling in Oliver v. Piatt, 3 How. 340. A like conclusion was reached by the supreme court of this state in Baker v. Woodward, 12 Or. 10, 6 Pac. Rep. 173, where it was held that a deed of the grantor’s “right, title, and interest” in the land, only passed the same subject to any prior disposition thereof. It is admitted that in some of the states this rule does not prevail. Mr. Pomeroy (2 Eq.' Jur. § 753, note 1) without expressing any opinion on the question, gives the cases thereon, from which it appears that the weight of authority is in favor of the rule as announced by the supreme court of this state and the United States, with which agrees my own judgment. But this court is bound by the decision of the latter tribunal, and in the absence of any controlling authority would on this question be inclined to follow that of the former. There is another view of this matter which may be worth con-
Counsel for the plea, however, maintains that the Carter deed, although technically a quitclaim, .is in effect within the ruling in Van Rensselaer v. Kearney, 11 How. 322, where it was hold that even in the case of “a deed of bargain and sale by release and quitclaim,” when it appears on the face thereof that the parties thereto bargained for and about an estate of a particular description or quality, that the grantor and those claiming under him, are thereby estopped to deny that lie was seized of sucii estate in the premises at the date of the conveyance. But in this case the deed contains no evidence that the parties bargained with reference to any particular estate other than the then right, title, and interest of T. J. Carter in the ditch, and that was nothing more than the bare legal title to the undivided half thereof, which in equity and good conscience he then held in trust for Rice, his vendee of the property. Besides the controversy in Van Rensselaer v. Kearney was between persons in privity with the parties to the deed in question, and therefore the decision is not applicable to the case under consideration. Certainly Rice is in no way estopped or bound by the Carter deed, which is subsequent in point of time to bis purchase and to which lie is a stranger.
But as it appears from the plea, and was admitted on the argument, that the only consideration for the mortgage' or the assignment is an antecedent debt, it must bo held bad. Such a debt is not a valuable consideration within the rule invoked by the defendant for his protection against the prior right of the plaintiff. Whore a conveyance is made or a security taken, the consideration of which is an antecedent debt, the grantee or person taking the security is not regarded as a purchaser for a valuable consideration. He lias not parted with anything of value. lie loses nothing by the transaction, and therefore there is no reason why equity should interfere to protect him against a prior right, although he may have taken such conveyance or security without notice thereof.
“This leads me to remark that the bank does not stand within the predicament of beinga bona fide purchaser, for a valuable consideration, without notice, in the sense of the rule upon this subject. The bank did not pay any consideration therefor, nor did it surrender any securities, or release any debt due * * * from * * * Godfrey to it. The transfer from Godfrey was simply a collateral security, taken as additional security for the old indebtment and liability of the parties to the notes described in the instrument of transfer. It is true that as between Godfrey * * * and the bank the latter was a debtor for value, and the transfer was valid. But the proteetionis not given by the rules of law to a party in such a predicament merely. He must not only have had no notice, but he m ust have paid a consideration at the time of the transfer, either in money or other property, or by a surrender of existing debts or securities held for the debts and liabilities. But here the bank has merely possessed itself of the property transferred, as auxiliary security for the old debts and liabilities. It has paid or given no new consideration upon the faith of it. It is therefore in truth no purchaser for value in the sense of the rule.”
Referring, then,' to the cases of Swift v. Tyson, 16 Pet. 1, and Railroad Co. v. Bank, 102 U. S. 14, in which it was held in the interest of commerce that one who takes negotiable paper, before maturity, in the usual course of business, in payment of or as security for an existing debt, is deemed to have given a valuable consideration therefor, and takes it dis-’ charged of all equities or defenses existing between antecedent parties, without reference to his knowledge of the same, Mr. Justice IIar-lan says:
“Do these principles apply to the case of a chattel mortgage, given merely as security for a pre-existing debt, and in obtaining which the mortgagee has neither parted with any right or thing of substance, nor come under any binding agreement, to postpone or delay the collection of his demand ? Upon principle, and according to the weightof authority, this question must be answered in the negative. The rules established in the interest of commerce to facilitate the negotiation of mercantile paper, which, for all practical purposes, passes by delivery as money, and is the representative of money, ought not, in reason, to embrace instruments conveying or transferring real or personal property as security for the payment of money.”
Some effect is sought to be given to the allegation in the plea that the assignment was made “in payment” of the defendant’s demand against the assignor. But the assignment is not set out, nor is it alleged that it
“To hold that a conveyance as security for an antecedent debt ismado without, but that one in satisfaction of such debt is made with, a valuable consideration, when the fact of satisfaction is not evidenced by any act of the creditor, but depends on mere verbal testimony, is opening the door wide for the easy admission of fraud. It leaves the rights of third persons to depend on the coloring given to a past transaction by the verbal testimony of witnesses, after the event has disclosed to the creditor the form and nature in which it is for his interest to picture the transaction. A rule which renders it so easy for an interested party to defeat the rights of others is clearly impolitic.”
The plea is bad, and is therefore disallowed.